A couple of years ago it seemed like Poipu was a gaping maw of construction chaos as a half dozen developers engaged a full court press hoping to be the first to bring their developments to market. Lately we have all kept eyes glued on them like the latest episode of a reality series as each contestant gets sent home with dashed dreams and empty pockets. Last week my partners and I made a quick trip to the fifth circuit courthouse steps to watch the second of two foreclosure auctions where banks holding construction paper, took the respective projects back from failing developer borrowers. The good news is that eventually, these “projects interrupted” will go to their REO departments and eventually be sold to new developers who will (hopefully) bring their cash to the table and finish what has been started effectively delaying much of the inventory to a time and economy that will work better for them than it did for their predecessors.
Out of the half dozen started, there are only two who keep making progress without interruption. Koloa Landing is now removing dust fences, installing landscape elements and finishing up the first five buildings in anticipation of the first closings to occur later this year….over at Kukui’ula, we are seeing new shops open monthly at the commercial center. This past spring we witnessed Maryl Pacific’s ground breaking on six of the Kukui’ula Cottages and will see that total grow to 16 by the year’s end. The first home in the Mauka Collection is going vertical high on the hillside. They are well into the finish out on the Plantation Clubhouse and the golf course itself has 11 out of 18 holes finished with the last 7 in the final stages of work in anticipation of their opening in December.
The key difference between finishing or failing for these many Poipu projects is fairly simple: “Cash is king”. Simply stated when faced with a shifting economy the kiss of death for any developer is monthly interest payments on borrowed construction funding. When the momentum gets stuck like it did in 2009, the cost of debt service sucks the margins right out of these offerings and eventually snowballs right to the court-house steps.
Both Koloa Landing and all developments at Kukui’ula are prime examples of this theory….they are working with their own equity and not reliant on borrowed funding. No debt pressure and thus the ability to keep moving forward and be ready as the economy and the Kauai real estate pendulum swings the other way.
If you are interested in a more specific update on any of these projects, call or email me. I have a new report this week from each. A hui hou and thanks for reading!